Sally Welborn, Wal-Mart Stores Inc., vice president for benefits, left, speaks at a news conference at the Arkansas state Capitol in Little Rock, Ark., as state Surgeon General Dr. Joe Thompson listens Thursday, Jan. 10, 2013. Walmart will join and help fund a state effort to cut health care costs by changing the way private insurers and Medicaid pay for medical services. (AP Photo/Danny Johnston)

LITTLE ROCK, Ark. (AP) — Wal-Mart Stores Inc. said Thursday it will add its Arkansas employees' insurance plan to a state effort aimed at lowering health care costs by changing the way private insurers and Medicaid pay for services, and it committed $670,000 to create a tracking system that would measure the initiative's success.

The world's largest retailer announced that it would participate in the state's payment improvement initiative, which moves away from a fee-for-service model to one where insurers pay for "episodes" of care rather than each individual treatment.

The Bentonville-based retailer said its insurance plan in Arkansas, which covers about 57,000 workers, will be a part of the initiative. Besides paying for the tracking system, the $670,000 commitment over the next four years also will help distribute information about the reforms and Wal-Mart will serve on an employer advisory council for the state.

Officials with the company said they believed Wal-Mart and other private companies would save money with the payment reforms and that the program aligns with its discount philosophy.

"We believe if we can apply that mindset of saving people money so they can live better to the health care system, then we will all come out ahead," Sally Welborn, Wal-Mart's senior vice president of benefits, said at a news conference at the state Capitol.

Welborn said Wal-Mart, which self-insures its health program, has not estimated how much money it hoped to save in health care costs by joining the payment initiative.

"The goal is for the average Arkansan, and in particular the patients that are administered through Wal-Mart's plans, that we would see better quality care and lower costs over time," she said.

Gov. Mike Beebe and state health officials called the move an important step in its plan, billed as the first in the nation of its kind to change the way health care pays for services.

"The old way of paying for health care is unsustainable," Beebe said. "The old fee for service model is unsustainable."

Under the initiative, the average cost of services provided by doctors and other health care providers will be measured once a year and compared against an established threshold. The providers will either receive a share of the savings, if the costs come in less than the established threshold, or pay for any costs that go above that level.

State officials say Wal-Mart's participation is important in luring other self-insured companies to take part.

"Wal-Mart's participation is very important because they represent that whole business model, that segment of payers that heretofore had not been included," Beebe said.

The state began rolling out the payment reforms in July, focusing on five treatment areas, and plans to add five more to the program in April. The state partnered with Arkansas Blue Cross and Blue Shield and QualChoice of Arkansas on the initiative. Arkansas Blue Cross and Blue Shield administers Wal-Mart's health insurance claims.

State Surgeon General Joe Thompson the tracking system would bring together efforts that Medicaid and the private insurers were already undertaking separately to measure the progress of the payment changes.

"The tracking initiative that Wal-Mart will support will allow us to put all three of those together so there is a statewide report for both the public and the private sector in one place that integrates the information from the participating carriers and Medicaid," Thompson said.

The system will allow the state to issue reports measuring the financial success of the payment initiative as well as progress on health indicators such as re-admissions, Thompson said.

The Department of Human Services projected that the state's Medicaid program would save $15 million next year because of the changes to the way the program pays for services. The state has also asked the federal government for permission to add Medicare to the health care initiative.

Arkansas is undertaking the health payment changes as it faces a shortfall in the state's Medicaid program. DHS has proposed cuts to several programs, including some nursing home care, to address the shortfall in the upcoming budget.